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Featured case: Kate Spade New York: Will Expansion Deepen or Dilute the Brand?

Who – the protagonists

What?

The Kate Spade brand was launched in 1993 by Kate Brosnahan Spade, a senior fashion editor at Mademoiselle. Unable to find a handbag to suit her needs, she designed and produced several sample handbags, initially selling them in high-end New York boutiques. The bags quickly sold out and she left her job to launch what was then known as Kate Spade.

By 1999, sales topped $28 million. The Neiman Marcus Group acquired a 56% stake in the same year, and in 2001, the Kate Spade website went live. The rest of the company was sold to the Neiman Marcus Group in 2006, and subsequently sold to Liz Claiborne Inc. in 2007.

Why?

A new team of top retail executives joined the firm, rebranded the company Kate Spade New York, and saw revenue growth accelerate as they refocused the brand on serving the KSNY customer. Quantitative and qualitative research enabled the team to develop a detailed profile of KSNY’s core customers and refined the brand’s positioning with a unique brand promise: ‘Kate Spade New York inspires you to lead a more interesting life’.

When?

By 2012, the company had bought out its Japanese joint venture and had recently opened stores in the UK, Dubai and Kuwait. On the heels of this robust international expansion, the company was now seeking other ways to grow the brand.

Where?

Based in New York, KSNY has stores in 180 countries across the world and now sells a wide range of products including clothes, perfume and stationery. The company’s website is considered its ‘flagship’ store.

Key quote

‘When one of our customers sees someone carrying a Kate Spade New York bag they think, “I’m going to like that person. I think that must be a really friendly, great person that I’d get along with”. Because it’s a brand that has such a happy, strong voice, it allows us to really go into any market and into any product category.’ – Mary Beech

What next?

With a clear mandate to seek new opportunities for growth, what opportunities should KSNY pursue? Should it target new customers? Create a diffusion brand? A new brand? Cultivate younger or older customers? What are the risks and how can they be mitigated?

Interested in finding out more?

Download the case and teaching note

Educators can login to view a free inspection copy of this case and its teaching note.

Eva Ascarza and Keith T. Wilcox

Eva and Keith explain how they met Mary Beech and why they were so interested in writing a case about her work and the challenges she faced.

Successful brand

Mary Beech spoke at the BRITE (Brands, Innovation, Technology) Conference held at Columbia in March 2014. Her theme, supporting and growing a successful brand, resonated with us, since this is a theme we teach in the core marketing course offered at Columbia Business School. It’s also great for us since students in New York enjoy discussing this well-known brand.

Mary was open to the idea of a case and invited us to videotape interviews with her and her team on location in Kate Spade’s New York headquarters, adding an extra level of texture to the ideas presented in the case. We then worked to refine the idea to fit our curricular needs, without breeching company confidentiality.

Great example

This case focuses on how to grow (expanding to new customer segments) while protecting the brand value. Kate Spade is a great example of a company that pays attention to all aspects of the brand, especially to understanding the psychographic underpinnings for its core customers. One question the case raises is how to expand Kate Spade’s presence while not alienating those most loyal to the brand.

Learning objectives

The learning objectives of the case include many basic marketing concepts beyond branding. Students learn about selecting target markets, segmentation, positioning, customer acquisition, and customer retention as they consider the issues that Kate Spade management faces. In addition, the data in the case gives insight into how a marketing leader gathers information in order to do her job. These insights are applicable across all industries that sell to consumers.

Differing responses

Many students think a new line is an exciting development for the company, but others believe the distinct target market and price point for the proposed sister brand, Kate Spade Saturday, will dilute the main brand. This makes for interesting discussions in the classroom!

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